Only start-ups with turnover up to Rs.25 crore are eligible for tax holiday

The Central Board of Direct Taxes (CBDT) has clarified that small start-ups with turnover up to Rs.25 crore will continue to get the promised tax holiday as specified in Section 80-IAC of the Income Tax Act, 1961(the ‘Act’). The central board further clarified that it does not recognise the ₹100crore turnover definition of a small startup put up by the DPIIT for tax holiday. The tax-holiday for eligible start-ups provides deduction of 100 per cent of income for 3 years out of 7 years from the year of its incorporation.
It is learnt that the above clarification was issued by CBDT to dispel the confusion created by some media report claiming discrepancy that the I-T law was yet to reflect DPIIT’s higher turnover threshold of Rs. 100 crore. The CBDT communiqué said that there was no inconsistency in DPIIT’s notification dated 19.02.2019 and Section 80-IAC of the I.T. Act, 1961. The clarification highlights para 3 of DPIIT’s notification, wherein it has clearly been mentioned that a start-up shall be eligible to apply for the certificate from the Inter-Ministerial Board of Certification for claiming deduction under Section 80-IAC of the Act, provided the start-up satisfies the following conditions specified in sub-clause
(i) That the start-up is incorporated on or after 1st April 2016, and sub-clause
(ii) its turnover does not exceed Rs.25 crore in the year of deduction, and
A start-up is eligible for a certificate from the Inter-Ministerial Board of certification only if it satisfies the above two clauses. Therefore, the turnover limit for eligibility for deduction under section 80-IAC of the Act, as per the DPIIT’s notification is also Rs.25crore, the communication said.
The CBDT statement dated August 22, 2019, further said that in view of above mentioned sub-clauses, all start-ups recognised by DPIIT which fulfilled the conditions specified in the DPIIT notification, did not automatically become eligible for deduction under Section 80-IAC of the Act.